Hardheaded Socialism Makes Canada Richer Than U.S.

July 16 (Bloomberg) -- On July 1, Canada Day, Canadians
awoke to a startling, if pleasant, piece of news: For the first
time in recent history, the average Canadian is richer than the
average American.

According to data from Environics Analytics WealthScapes
published in the Globe and Mail, the net worth of the average
Canadian household in 2011 was $363,202, while the average
American household’s net worth was $319,970.

A few days later, Canada and the U.S. both released the
latest job figures. Canada’s unemployment rate fell, again, to
7.2 percent, and America’s was a stagnant 8.2 percent. Canada
continues to thrive while the U.S. struggles to find its way out
of an intractable economic crisis and a political sine curve of
hope and despair.

The difference grows starker by the month: The Canadian
system is working; the American system is not. And it’s not just
Canadians who are noticing. As Iceland considers switching to a
currency other than the krona, its leaders’ primary focus of
interest is the loonie -- the Canadian dollar.

As a study recently published in the New York University
Law Review pointed out, national constitutions based on the
American model are quickly disappearing. Justice Ruth Bader
Ginsburg, in an interview on Egyptian television, admitted, “I
would not look to the United States Constitution if I were
drafting a constitution in the year 2012.” The natural
replacement? The Canadian Charter of Rights and Freedoms,
achieving the status of legal superstar as it reaches its 30th
birthday.

Canadian Luck

Good politics do not account entirely for recent economic
triumphs. Luck has played a major part. The Alberta tar sands --
an environmental catastrophe in waiting -- are the third-largest
oil reserves in the world, and if America is too squeamish to
buy our filthy energy, there’s always China. We also have
softwood lumber, potash and other natural resources in
abundance.

Policy has played a significant part as well, though. Both
liberals and conservatives in the U.S. have tried to use the
Canadian example to promote their arguments: The left says
Canada shows the rewards of financial regulation and socialism,
while the right likes to vaunt the brutal cuts made to Canadian
social programs in the 1990s, which set the stage for economic
recovery.

The truth is that both sides are right. Since the 1990s,
Canada has pursued a hardheaded (even ruthless), fiscally
conservative form of socialism. Its originator was Paul Martin,
who was finance minister for most of the ’90s, and served a
stint as prime minister from 2003 to 2006. Alone among finance
ministers in the Group of Eight nations, he “resisted the siren
call of deregulation,” in his words, and insisted that the banks
tighten their loan-loss and reserve requirements. He also made a
courageous decision not to allow Canadian banks to merge, even
though their chief executives claimed they would never be
globally competitive unless they did. The stability of Canadian
banks and the concomitant stability in the housing market
provide the clearest explanation for why Canadians are richer
than Americans today.

Martin also slashed funding to social programs. He foresaw
that crippling deficits imperiled Canada’s education and health-care systems, which even his Conservative predecessor, Brian
Mulroney, described as a “sacred trust.” He cut corporate taxes,
too. Growth is required to pay for social programs, and social
programs that increase opportunity and social integration are
the best way to ensure growth over the long term. Social
programs and robust capitalism are not, as so many would have
you believe, inherently opposed propositions. Both are required
for meaningful national prosperity.

Orderly Fairness

Martin’s balanced policies emerged organically out of
Canadian culture, which is fair-minded and rule-following to a
fault. The Canadian obsession with order can make for strange
politics, at least in an American context. For example, of all
the world’s societies, Canada’s is one of the most open to
immigrants, as anyone who has been to Toronto or Vancouver will
have seen. Yet Canada also imposes a mandatory one-year prison
sentence on illegal immigrants, and the majority of Canadians
favor deportation. Canadians insist that their compassion be
orderly, too.

This immigration policy is neither “liberal” nor
“conservative” in the American political sense. It just works.
You could say exactly the same thing about Canada’s economic
policies.

Canada has been, and always will be, overshadowed by its
neighbor, by America’s vastness and its incredible versatility
and capacity for reinvention. But occasionally, at key moments,
the northern wasteland can surprise. Two hundred years ago last
month, the War of 1812 began. Thomas Jefferson declared, “The
acquisition of Canada, this year, as far as the neighborhood of
Quebec, will be a mere matter of marching.” The U.S. was
comparatively enormous -- with almost 8 million people, compared
with Canada’s 300,000. The Canadians nonetheless turned back the
assault.

Through good luck, excellent policy and even some heroism,
Canada survived the war. But it has taken 200 years for Canada
to become winners.

(Stephen Marche is a novelist and columnist for Esquire
Magazine. His most recent book is “How Shakespeare Changed
Everything.” The opinions expressed are his own.)

Today’s highlights: the editors on good news from Guantanamo,
why Jamie Dimon’s bonus should be clawed back and how to put
more electric cars on the road; William D. Cohan on Romney’s
magical IRA; Albert R. Hunt on the candidates’ need to spell out
debt-cutting plans; Anthony Luzzatto Gardner on Bain Capital
under Romney.